China’s economy grew faster than expected in the first quarter, expanding 4.8%, but the risk of a sharp slowdown over coming months has risen as Shanghai’s lockdown is extended indefinitely and further COVID-19 curbs may follow. 

Nearly all of Shanghai is now under lockdown, with most residents unable leave their homes, even for food, while some businesses are operating under “closed loop” conditions, where workers sleep on site.

Cargo deliveries into Shanghai Pudong Airport, meanwhile, are becoming backed up. Prior to the city’s lockdown, around 1,000 consignments would typically arrive each day, with a collection rate exceeding 80%, but because there is not enough trucking capacity, due to driver isolation rules and restrictions on vehicle access to the road infrastructure, that pick-up rate has slumped to just 10%.

In addition, many other airports throughout China, are becoming very congested and flights are having to be cancelled or diverted due to operational issues. Zhengzhou Airport (CGO) has effectively been closed for the next week, due to an influx of air freight, as a consequence to the issues in Shanghai and the surrounding region. This is having a huge impact on rates and available capacity, as well as carriers suspending inbound freight into China, due to 10-day backlogs in accessing the cargo once it has arrived. It really is quite a mess.

Cross-province road transport and the different restrictions and health requirements imposed locally, mean truck drivers are having to manage an array of policies and typically wait hours, each time they need to undertake Covid tests, with other cities becoming more reluctant to let trucks from Shanghai enter.

Shanghai International Port Group (SIPG) has denied there were more than 300 ships waiting to load or unload at the port earlier this month, insisting they are maintaining normal 24-hour operations and that the average berth waiting time for container vessels was less than one day. Real-time vessel tracking platforms tell another story!

While there has been no noticeable diversion of container ships from Shanghai so far, increasing quantities of cargo is being diverted to alternative ports, including Ningbo, Qingdao and Tianjin, and LCL shipments from Shanghai are under threat, due to cross-contamination fears in the warehouse.

Data reports in the press suggest that Shanghai container ports are experiencing “significantly reduced” volumes, with the seven-day average throughput now down 33% and as the supply chain situation in Shanghai continues to deteriorate, the container port is running out of capacity for some types of cargo, with Maersk ceasing bookings for refrigerated and dangerous cargo.

Shanghai factories that have been operating under ‘closed-loop systems’ may soon be forced to stop work due to a combination of material shortages or logistical challenges that make moving people and goods increasingly challenging, plus workers who have been contained for more than three weeks and need to be replaced.

Reduced land-side trucking capacity is expected to continue at all main ports, effectively reducing the capacity available for cargo collections and deliveries, which means factories may not meet planned delivery schedules. We recommend checking with your vendors, to clarify the status of your orders, and whether they have actually been manufactured.

We will continue to closely monitor the situation and will update as changes occur. When China does begin to lift lockdowns and supply chains start to flow freely again, we will share with all of our customers as quickly as possible, as the likely outcome after the situation is resolved, will be pent up demand for delayed goods reaching market and we suspect a congested environment from May onwards, as production is increased in line with lockdowns being lifted. More news to come…..

Metro’s cloud-based supply chain management platform, MVT, simplifies the most demanding global trading regimes, by making every milestone and participant in the supply chain transparent and controllable, down to individual SKU level. 

To discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile.

The lifting of COVID restrictions in parts of Shanghai this week has been postponed after nearly 20,000 new cases were reported on Monday.

While the primary port terminals and airport remain open, most workers are in locked-down neighbourhoods and the impact on production and inland logistics is severely limiting supply chain operations.

With limited goods available to despatch, demand for air cargo capacity out of Shanghai is decreasing quickly, with carriers cancelling flights. Despite the drop in demand, reduction in ground handling capability and capacity has seen air freight rate indexes to North Europe increase by 43% since the start of the recent outbreaks. Shanghai Airport is effectively closed for cargo receipt and despatch and is being redirected to Zhengzhou Xinzheng International airport nearly 1000 kilometres away.

The world’s largest sea container port remains open 24 hours a day and even though it is operating within a “closed-loop” bubble, which requires workers to stay on-site, increasing numbers are quarantined. While the closure of many warehouses, the drop in manufacturing and serious disruptions to trucking have significantly reduced the availability of goods and the port’s throughput, which reportedly has resulted in queues of in excess of 300 vessels, as of today, awaiting berth outside the port.

A flash survey on the impact of COVID on business in Shanghai found:

99% of respondents had been impacted by the recent outbreak

86% of manufacturers reported that their supply chains had been disrupted

82% of manufacturers reported slowed or reduced production

54% of respondents have decreased 2022 revenue projections 

The soaring number of cases in Shanghai has restricted driver testing capacity and with many drivers from neighbouring provinces reluctant to enter Shanghai, because of the risk of having to quarantine on their return, haulage capacity has been slashed.

The deteriorating COVID situation has raised concerns over worsening port congestion elsewhere in China, with Yantian and Shekou experiencing longer waiting times.

According to Bloomberg, there are 174 vessels anchored or loading across South China – the most since the region was affected by typhoons in October - representing 14% of the total fleet.

What was expected to be a relatively short situation is now becoming a much bigger concern to production by manufacturers, logistics infrastructure and ultimately the global economy with even greater challenges in what was an already challenging environment. This is creating issues both at a local level and on a much wider scale as detailed in this recent news article published by the BBC which is worth reading - China lockdowns 

With over 80% of manufacturers reporting disrupted supply chains and reduced production, factories may not meet planned delivery schedules. This is why we recommend checking with your vendors, to clarify the status of your orders.

Metro’s cloud-based supply chain management platform, MVT, simplifies the most demanding global trading regimes, by making every milestone and participant in the supply chain transparent and controllable.

With end-to-end visibility across the extended supply network and global control down to individual SKU level, it is simple to adapt to external developments. Changing supply lines, managing existing or adding new vendors, monitoring product flows and outbound order data, from any location.

To discuss how our technology could support your supply chain, please contact Simon George our Technical Solutions Director or Elliot Carlile.